if a sole proprietor converts our business to a S corporation, how is their income taxed?

compensation for services is taxed as wages and reported on form W-2. The owner share of the business profit is reported on schedule K-1 and tax that ordinary income.

compensation from services is reported on schedule K'Waun and subject to ordinary income and self-employment taxes.

all income from businesses reported on schedule C form 1040 and is subject to ordinary income tax and self-employment tax

all income from business is taxed to the business the business owner pays no income tax or self-employment tax.